Market Commentary

Daily reports from our Chief Economic Strategist.

SOME THOUGHTS ABOUT INTEREST RATES
I am ardent believer in the phrase it is not what one does but rather why one does it. I am also an ardent believer in the philosophy that norms and means are significant and are important to understand where one might be going for the vast majority of events the environment reverts back to or close to the mean.
YESTERDAY WAS AN EXTREME
Equities and oil advanced and Treasuries plunged as the odds of a trade deal continue to rise. Bloomberg writes that the 11 basis points rise in the 10-year is a “three sigma” event
EQUITIES MIXED, RISING 10-YEAR TREASURY YIELDS AND OIL PRICES
Equities were mixed on trade and earnings. Treasuries sold off as yields are now at their highest levels since September. Oil rose for the third consecutive day.
EARNINGS ARE EXCEEDING DUMBED DOWN EXPECTATIONS
According to Bloomberg 78% of 303 S & P 500 companies that have reported earnings have exceeded expectations. Regarding revenues, 39% beat forecasts and 40% matched. For the quarter earnings are expected to decline by 2.1% YOY, an improvement over the 3.8% expected drop.
JOBS DATA AT 8:30
Today is the release of the BLS employment survey. The recessionary narrative rose yesterday as the Chicago PMI [manufacturing in the region] posted the lowest reading since 2015. In my view a major reason for this decline is the GM strike and
THE FED DID AS EXPECTED EVEN AS GDP SURPRISED ON THE UPSIDE
The first print of third quarter GDP validated my long held view of today’s recessionary fears are vastly overblown. The economy expanded at a 1.9% annualized rate versus the consensus view of a 1.6% pace. Perhaps the most significant aspect of the report is
TRADE, MONETARY POLICY AND FIRES
Equity markets are pricing about a 90% probability the Fed will lower interest rates on Wednesday. In my view the global headwinds that pushed the Bank to cut rates in July and September have abated somewhat
A BIG WEEK BUT WILL IT BE A DUD LIKE PAST BIG WEEKS?
Many times I have commented about the narrowness of the market. Bloomberg quantified this lack of breadth on Friday. The newswire stated Thursday was the third time this year that the number of decliners was least 400 more than gainers when the NASDAQ was up at least 0.5%. Prior to 2019 it had only happened four times
EARNINGS ARE REGARDED AS “MIXED”
Is a new theme arising? For many years market participants have been rationalizing the valuations of profitless companies. Was We Work the proverbial straw that broke the camel’s back?
ARE THE VAST MAJORITY OF MARKET PARTICIPANTS JANUSIAN THINKERS?
Value trounced growth yesterday, partially the result of earnings. OK, growth has decimated value since at least 2008 and depending upon the source value is trading at the sharpest discount to growth since at least 2000. Some data points go as far back to 1986 or even 1957.

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